Event Summary
With house prices down, many Americans now owe more on their mortgages than their homes are worth – a problem referred to as “negative equity.” In addition, interest rate resets on select subprime and traditional loans will result in even higher mortgage payments for many families already struggling to make ends meet. The results of these conditions are already apparent, with foreclosures in January 2008 up 57 percent from the year before. Without new and effective public policy, some experts project that 2 million families will lose their homes during the next two years – an outcome that would hurt communities while causing broader collateral damage for the economy, jobs and wages.
Event Information
When
Friday, March 14, 2008
11:00 AM to 1:00 p.m.
Where
Falk Auditorium
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC
Map
Congress and the Bush administration are considering a broad array of proposals to address the current housing crisis, ranging in scope from minor adjustments to the mortgage-market to the creation of a federal agency to handle widespread refinancing of mortgages. However, the question of which policy provides the most effective remedy – while balancing the associated costs and risks – remains unanswered.
On Friday, March 14, The Hamilton Project at Brookings hosted a discussion on proposed policy responses to the mortgage-foreclosure problem. Former U.S. Treasury Secretary Robert E. Rubin gave welcoming remarks followed by former U.S. Treasury Secretary Lawrence H. Summers, who provided an overview of the mortgage landscape and its broader economic implications. A roundtable discussion, including Michigan Law School Professor Michael S. Barr, Brookings Senior Fellow Douglas W. Elmendorf, JPMorgan Chase Senior Vice President Marguerite E. Sheehan, and NeighborWorks America CEO Kenneth D. Wade evaluated several specific proposals for ameliorating the mortgage-foreclosure problem and proposed next steps for consideration.
Transcript
ROBERT RUBIN: Credit market disruption as you know began with subprime mortgages and then spread to leverage finance and then to most other credit markets but although now, it’s spread out to affect credit markets more generally. I think in many ways mortgages remain at the heart of today’s credit market duress contributing pressure on housing prices, balance sheets, the lending appetite of creditor institutions, foreclosure rates, confidence more generally and other credit markets. In that context the policy makers are grappling with the question of whether substantial additional measures should be adopted with respect to the mortgage markets beyond those already in place and if so, should public monies be used.
As many of you know I work at a major financial institution, but the views that I’m expressing are mine. Not the institution’s. And they relate solely to the question of economic risk and risk to homeowners.
With respect to economic risk, I’ve been around financial markets for a long, long time but I believe we are in somewhat uncharted waters and that the outlook for both the credit markets and the economy is relatively uncertain. It is certainly possible that the markets will work their way through all of this without inflicting significant additional damage on the economy. But having said that, I think the risk is serious enough to call for substantial additional action in the mortgage area assuming that measures can be adopted that when the pros and cons are weighed out, are on balance, sensible.
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Participants
Welcome
Robert E. Rubin
Citigroup Inc.
Opening Remarks and Moderator
Lawrence H. Summers
Harvard University
Roundtable Discussion
Michael S. Barr
University of Michigan Law Schoo
Senior Fellow, Economic Studies
Marguerite E. Sheehan
JPMorgan Chase
Kenneth D. Wade
NeighborWorks America